Sprint Nextel and Virgin Mobile USA have reached an agreement for Sprint to acquire Virgin Mobile for US $483 million, the companies said Tuesday.
The acquisition will strengthen Sprint's position in the growing prepaid mobile phone business, by merging Virgin Mobile with Sprint's Boost Mobile business, Sprint said in a press release. The two prepaid brands each appeal to different customer demographics, Sprint said.
At closing, Sprint will retire all of Virgin Mobile USA's outstanding debt, which was $248 million as of March 31. Part of the purchase amount includes Sprint's current 13.1 percent share in Virgin Mobile.
Sprint's prepaid business will be led by Dan Schulman, Virgin Mobile USA chief executive officer, and he will report directly to Dan Hesse, Sprint Nextel president and chief executive officer. Matt Carter will continue to lead Boost Mobile and will report to Schulman.
The deal "positions Sprint for even greater success in the prepaid wireless segment," Hesse said in a statement. "Prepaid is growing at an unprecedented rate ..."
Sprint plans to make administrative cuts after the deal, the company said.
In the deal, Virgin Mobile USA stockholders will receive shares of common stock of Sprint with a 10-day average closing price equal to $5.50 per Virgin Mobile share. Public stockholders own 43.3 percent of Virgin Mobile shares.
After the deal closes, Virgin Mobile USA will continue to license the Virgin Mobile USA brand from the Virgin Group. Sprint will pay $12.7 million for a licensing deal until 2021. The agreement allows Virgin Mobile USA to extend the term until 2047.
Sprint will pay Virgin Group approximately $50 million at closing.
The companies expect the deal to close late this year or early in 2010.